Consumers are expecting higher inflation on the horizon, the latest government data shows, and a key demographic in the paycheck-to-paycheck economy is less optimistic about the future.
The latest consumer confidence surveyas published by nonprofit economic research organization The Conference Board, noted that the overall index came in at 104.7, relatively unchanged from February's reading of 104.8.
Reduced expectations
The expectations index – which the board says is based on consumers' near-term outlook for income, business and labor market conditions – fell to 73.8 from 76.3 in February.
“An expectations index value below 80 often signals an impending recession,” the executive added.
Dana M. Peterson, the board's chief economist, said: “Consumers in the $50,000 to $99,999 income group reported lower confidence in March.”
The latest PYMNTS intelligence report on the status of the Paycheck-to-paycheck economics in detail that two-thirds of consumers in this income bracket live paycheck to paycheck. They expect to spend about 30% of their income on housing-related expenses, which is higher than the total sample's 28.7%, with another about 20% going toward food and household goods.
Looking at inflation next year, consumers overall expect prices to rise 5.3%, up from 5.2% in February. Looking out six months, 13.9% of consumers expect more jobs to be available, down from 14.1% in February.
Subdued spending expectations?
The committee also provided assessments on consumer spending prospects. Across 16 different categories – from motor vehicles to pet care to travel – only a minority of respondents said they planned to spend money in the short term.
A significant percentage said they would spend the same amount in the next six months. Up to 30% of consumers said they expect to spend less on travel in the next six months. Nearly 18% said the same about spending on beauty and personal care items and services. A whopping 26.2% said they would spend less at restaurants.
PYMNTS found that 66% of consumers with incomes between $50,000 and $100,000 say they have cut back on non-essential spending, in part due to retail price increases. Only 12% of these respondents believe their wages will be in line with inflation, meaning most people expect the real purchasing power of their take-home pay to continue to decline.
Given that inflation expectations remain high, expectations for the future remain subdued and these individuals are already cutting spending, traders could be bracing for a difficult few months.
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